RVLT: Revolution Lighting Misses Revenue Target as Large Deals Slip

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By Lisa Thompson



Revolution Lighting Technologies (NASDAQ:RVLT) missed its revenue guidance by reporting Q2 revenues of $36.4 million versus $43.4 million a year ago, down 16%. A few large opportunities that were won, were expected to have started shipping in Q2, but slipped out of the quarter. For example, a large contract with the city of Boston that was won by its partner Honeywell was supposed to have begun in Q2 but product delivery has not started.

In Q2 2018, the company had a gross margin of 32.3%, slightly down from 32.8% a year ago on reduced sales.

Operating expenses were $12.9 million versus $15.5 a year ago when acquisition, severance, and transition costs are included. Without those in both quarters, operating costs were $12.1 million versus $13.3 million in 2017. $800,000 of the difference was a decline in amortization and depreciation. Operating income was a loss of $1.1 million versus breakeven a year ago.

Interest expense increased to $1.1 million for the quarter from $943,000 in Q2 2017. The company expects cash flow and collections to improve in the second of the year when it should begin to pay down some borrowings.

GAAP net loss was again $2.2 million, as it was in Q1 2018, versus a loss of $0.7 million a year ago. The company pays no taxes and has a federal tax loss carry forward of more than $50 million and a state tax loss carry forward of over $36 million.

GAAP EPS loss per share was $0.10 versus a loss of $0.12 per share in 2017. Excluding charges and stock based compensation the non-GAAP EPS loss was $0.04 versus a loss of $0.03 per share in Q2 2017.

Adjusted EBITDA for the quarter was $1.7 million versus $3.2 million in 2017 and $1.0 million in the first quarter of 2018. The company uses EBITDA as its goal metric. This was an EBITDA margin of 4.7%, an improvement over the 2.8% in Q1.

Forecast Guidance

Management expects Q2 2018 revenue in the $40 – $42 million range and adjusted EBITDA in the area of 6%. It reduced its full year 2018 revenue guidance from $165 – $175 million to $160 – $170 million, versus $152 million in 2017, and adjusted EBITDA in the 6% – 7% range from its previous guidance of 8% – 10%.

The company continues to increase its addressable market and is now working with a partner to be approved by the FAA for airport light replacement. This could be a huge opportunity with only one other competitor. While sales could be a way off, it would allow the company to replace airport lights in US commercial and military airports as well as aircraft carriers and overseas locations. This includes runway lights, facilities, and parking areas.

View Exhibit I

Another new avenue of sales is exemplified by its deal with a large REIT with $2.8 billion in properties. RVLT will be a partner in retrofitting properties to improve energy efficiency and property values. It is especially excited about the implementation of an online ordering system that allows owners to send requests directly to RVLT to be filled.

The company recently introduced a new line of controls to rave reviews. Management believes it has an offering that beats the competition hands down in quality and features and is even in talks with a competitor for a private-label version. It believes it may even have licensing opportunities for its technology.

In the quarter, RVLT started delivery of its second award from a large box retailer, and is in a pilot with this retailer to replace fixtures also leading to even more upside if successful.

The company already sold $4 million to the Navy by providing 100,000 bulbs earlier this year, and is expecting at least another 150,000 units to be put out on an RFP in the next few months.

Revolution’s ability to meet Made in America standards as well as Trade Agreement Act compliance has helped it in the US government as well as the corporate market. It recently doubled the size of its Simi Valley facility in order to meet demand. While there are threats of potential tariffs on Chinese goods, RVLT believes what it sources from China will not be affected. In the worst case scenario, it is already aware of US based suppliers of its needed components due to contacts made in sourcing its Made in America product line.

The company continues to work to cut costs and improve operations. It recently actions include reorganizing and cutting staff and it believes it has taken $1.3 million out of its annual budget. It now believes its EBITDA breakeven point has been brought down to $31 million in quarterly revenues.

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